New Report Highlights Increased Vulnerability in Aid Spending Due to Insufficient Anti-Fraud Measures

The UK aid sector is facing a heightened risk of fraud, according to a new report by the Independent Commission for Aid Impact (ICAI). The watchdog has raised concerns over the Foreign, Commonwealth and Development Office (FCDO)’s ability to tackle fraud proactively, blaming budget cuts, the pandemic, and a recent departmental merger for the vulnerabilities.

The FCDO’s 2020-21 financial year showed a reported fraud loss of £2.2 million, a small fraction of its £9.9 billion aid budget. However, ICAI stated that the department is more reactive than proactive when it comes to identifying and preventing fraud, leaving it exposed to the evolving methods of fraudsters using technologies like cybercrime and artificial intelligence.

The ICAI also highlighted a number of factors that have compounded the risk. The 2020 merger that formed the FCDO introduced a new finance system, which caused delays in payments and reliance on offline workarounds—both of which could be exploited by criminals. Furthermore, the 2021 cut in the UK’s aid budget from 0.7% to 0.5% of the country’s gross national income has led to less funding being allocated for monitoring, evaluation, and anti-fraud measures, weakening the ability to oversee aid programmes effectively.

Tarek Rouchdy, ICAI Commissioner, said: “While we acknowledge the FCDO has some strong fraud risk management processes, it is still too focused on reacting to fraud rather than seeking it out before it happens. Investment in anti-fraud capability and senior oversight of aid programmes is crucial to safeguard taxpayers’ money.”

The report also noted that staff working in fraud liaison roles in countries are stretched too thin, dedicating only about 10% of their time to fraud prevention, which undermines their effectiveness. The pandemic exacerbated the situation, as COVID-19 travel restrictions hindered staff from monitoring projects in the field—an essential part of tackling fraud.

Sarah Champion, Chair of the Commons International Development Committee, echoed the concerns, stating that the FCDO is not doing enough to ensure that aid funds are protected from fraud and corruption. She called for proper investment in anti-fraud measures to ensure the UK’s reduced aid budget is effectively used to combat poverty.

An FCDO spokesperson responded by expressing commitment to eliminating fraud, stating: “We welcome ICAI’s review and are dedicated to ensuring every penny of development spending delivers value for money. We conduct thorough due diligence checks and regular performance reviews to ensure that funds are spent appropriately.”